That figure was closing in on the $US86.70 reached in September 2012 and came on top of prices dropping by more than one third this year due to a global oversupply of iron ore and lower steel prices.

At its profit results briefing this week, small WA producer Atlas Iron's chief executive said the company's break-even price was around $US80 to $US85 a tonne.

Ken Brinsden admitted that profit margins had fallen as the iron ore price dropped but said the miner would respond by cutting costs further.

"Nobody likes to see their margin getting squeezed and we'd say we're falling in that category but we still have headroom in a cashflow sense," he said on a conference call with journalists.

Despite the price decline, Atlas Iron returned to profitability in the 2014 financial year with net profit of $14.3 million as it expanded mine production to a record of nearly 11 million tonnes for the year.

Low-grade producers struggling but won't go under: analyst

Its estimated cost of production stands at around $US99 a tonne because of its lower quality iron ore, which is more expensive to produce.

Gindalbie's project has been beset by production delays and cost blowouts and it announced a $640 million writedown on the Karara project earlier this month because of the fall in the iron ore price and higher than expected Australian dollar.

China's CITIC said it made a first-half loss of $138 million on its Sino Iron project in the Pilbara because of production problems and higher finance costs.

Despite the higher costs of the low-grade Australian producers, UBS's Mr Morgan does not think they will go out of business anytime soon.

He said the higher-cost Chinese producers had already stopped production.

"The Australian producers are not yet at a level where they would think about things like shutting," Mr Morgan said.

He said the local miners were focused on reducing costs further.

"You don't tend to see people shut until they've made significant losses for a period of time," he said.

"I'm not suggesting we're there yet."

Government takes lower royalties due to falling iron ore prices

Falling iron ore prices are also hurting Australian governments because it means lower royalties.

For every $US1 fall in the price of iron ore, the Western Australian government loses $49 million.

Bank of America - Merrill Lynch chief economist Saul Eslake said the federal budget's bottom line could also be affected if the iron ore price continues to go down.

"I wouldn't be rushing to revise up estimates of the budget deficit just yet, although obviously if iron ore prices do continue on this trajectory or indeed don't rebound to something in the mid-$90s, then all else being equal the Government will run a bigger budget deficit this year than it had been expecting," he told the ABC in an interview.

BHP Billiton chief executive Andrew Mackenzie has said he does not expect iron ore prices to go back above $US100 a tonne.

But that is not as big a concern for BHP Billiton or Rio Tinto because their cost of production is around $US40 to $US50 a tonne, although the iron ore price falls have hit the share prices of the miners.

Some analysts think the price could rebound as steel producers restock in China.

ANZ said steel inventories are 2.5 million tonnes lower than at the same time last year.

The company's commodity analyst, Ankit Pahuja, said the price fall was cyclical.

He said he thought the price could recover towards $US100 later in the year if iron ore stockpiles at Chinese ports drop.

"In terms of the current momentum you could see another $2-3 tonne decline but a relief rally is potentially likely later in the year," he told the ABC.

Mr Morgan said there could be more sharp falls over the next few weeks but he believes prices will then recover.

"The price can decline. It will be days, weeks - not months," he said.

"I think towards the end of the year prices will be back toward $US100 a tonne."